Regulators will soon be deciding whether Californians installing solar panels will have to pay new monthly fees to their utility, including PG&E and the state’s two other major utilities.

The debate, years in the making, was sparked by something that’s been troubling the utility sector: as more Californians make their own power, electric utilities are bringing in less money.

And the growth of solar in the state has exploded. PG&E estimates that it hooks up a new solar system to the grid every seven minutes.

Solar Incentives

At stake is a core incentive that solar customers rely on: a policy known as “net-energy metering.”

When homeowners like Matt Brown decide to install solar, they’re usually looking at the bottom line. When Brown bought panels for his Oakland home earlier this year, he calculated that he’d start saving money in five or six years because of net-metering.

‘No state is more committed to encouraging solar than California.’ Governor Jerry Brown

“I think that was one of the most important things for us,” Brown says.

Here’s how it works: in the evening, when Brown is getting dinner ready for his two young sons, he’s using plenty of electricity to power his lights and appliances. Since it’s dark out, his solar panels aren’t producing and he has to buy that electricity from PG&E.

But his utility bill isn’t as high as you might think.

“Right now we’re projected basically to have a zero bill,” Brown says.

That’s because during the day, when it’s sunny and Brown’s panels are cranking out electricity, he sells the extra back to PG&E, at the same price he buys it from the company. So the power he sells cancels out the power he buys, keeping his monthly utility bill low.

Utility Shortfall

Those low bills have been raising red flags in California, where the solar market is the largest in the country.

“It is going to be a challenge for the utility,” says Aaron Johnson, a vice president at PG&E. “How do we accommodate all that solar? How do we incorporate it into the grid?”

PG&E’s territory, running from Bakersfield nearly to the Oregon border, is home to a quarter of all the rooftop solar systems in the country. Johnson says the wires and substations that make up today’s electric grid may not be up to the task of moving so much power both into and out of homes.

“We’re going to need a grid that can accommodate these two-way power flows,” he says. “It wasn’t originally designed to do that. And as we begin to build that modern, 21st century grid, everyone is going to have to contribute to that. And we think solar customers need to contribute to that.”

Johnson says with their low bills, solar customers aren’t contributing enough to upgrade the power grid. That’s creating a shortfall that, according to PG&E, will reach up to $3 billion annually within a decade.

“It’s certainly growing and will continue to grow significantly if we don’t look at a different model for solar going forward,” Johnson said.

Under PG&E’s proposal, net-metering would work differently for new solar customers. For every kilowatt-hour of electricity a solar customer sells PG&E, they’d be paid a lower, wholesale price instead of the retail price.

New solar customers would also pay an added monthly fee. PG&E would take a customer’s highest electricity demand for any given month, which is the moment their home is drawing the most power. It ranges from 1 to 20 kw, but for an average customer, it’s between 3 and 4 kw. PG&E would then change $3 per kw, which means the monthly fees would range between $3 and $60 dollars.

The proposed changes would only apply to new solar customers, starting sometime late next year. Existing solar customers would be grandfathered into today’s net-metering system.

Southern California Edison and San Diego Gas & Electric have each proposed similar charges for their customers.

Solar Anxiety

“That argument can only come from a monopoly that’s used to selling every electron to every customer for the past one hundred years,” says Walker Wright of Sunrun, one of the largest solar companies in California. “What rooftop solar represents is the first true form of competition.”

Wright says you don’t have to look far to see how new solar fees would harm the industry. A utility in Arizona recently started charging solar customers $50 a month.

“We saw a 95 percent drop in the applications for solar,” he said. “We saw absolute devastation in the market and it’s created a lot of anxiety.”

Wright says PG&E’s proposal would make it uneconomical for many Californians to go solar. Plus, the system is more complicated, making it harder for customers to commit to solar.

“You don’t understand what your savings will be each month,” he says. “You can’t build a business around that and everything comes to a halt.”

Wright also says when PG&E calculates the financial shortfall it says solar customers are causing, it doesn’t consider the cost savings that solar customers are providing.

“They provide clean energy at a local level during the heat of day when that utility would otherwise have to buy power out in the desert and wheel it into where people live,” he says.

PG&E contends that solar will continue to grow under the net-metering changes.

“We think solar has made great cost reductions and can accommodate paying more of their own way towards helping contribute to the grid,” said Johnson.

Regulators at the California Public Utilities Commission will ultimately decide.

“No state is more committed to encouraging solar than California,” said Governor Jerry Brown in an interview.

“And the Public Utilities Commission is filled with people who share that commitment,” Brown continued. “So, yes, we’re hearing a lot from the [solar] advocates but I would be very confident that the PUC will listen and will get to the right answer.”

Utility Shake-Up

“These questions are very big and both parties have a point,” said Brian Chin, who analyses utilities for Merrill Lynch.

Chin says it just shows how solar is shaking up electric utilities.

“You look at the business model and you can’t help but go the business model has to change in the next fifteen years in some way, shape or form,” he said.

Regulators at the California Public Utilities Commission are expected to release their proposal for what solar customers will pay by the end of the month. Whatever California decides, the precedent regulators set could spread nationwide.

Oh so it would be “uneconomical” ? How about the economics for the non=solar ratepayers who cover the costs of the grid? Anyway I thought these users cared more about the environment. Turns out its more about the money.

Mile Hi Dave

Here in Colorado, folks with solar HAVE to get on the grid, no choice is given. If I want to go solar, why should I have to be connected to a grid I won’t be using, even at night. It used to be that power storage was the main hindrance, but TESLA has a great new battery out that can store plenty https://www.teslamotors.com/powerwall Why should anyone be forced to pay for something they aren’t using? With 2 of these batteries, I would not need power from the grid, even if it rains for 3 days. Nowadays, minimal daylight will move the needle.

LazLong

Generalizing in this fashion is the sign of a weak, lazy intellect. Not all people who deploy solar do it for identical reasons or balance of reasons.

Yes, solar customers should pay their fair share for grid use. Likewise, solar customers should be allowed to sell their electricity at a profit, just as the utilities do. After all, the non-solar customers/utilities should pay for the upkeep of the solar generation facilities from which they receive power.

Water_the_tree

But solar customers don’t pay their fair share of grid use in almost every case.

And selling at a profit? They get power in, and out, better than free.
See, overproduction gets paid at retail (generation and T&D), not generation cost. Soooo, they get credited for T & D tariffs, using the grid they don’t pay to maintain, when they “sell” back to the utility. Its like someone calculating what a widget costs to build and ship, and the buyer paying for the shipping again. Solar customers want to sell their overproduction, then buy the T&D!
Now they just free load on the grid.

As for your last assertion, it is absurd on its face. The market is rigged. It is variable in nature, meaning it is unreliable, and with NEM pricing, non-solar customers pay over 1x what PG&E would charge. Factor in seasonal or TOU pricing, yep, non-solar subsidizes solar. Why would a rational non-solar customer choose to subsidize a solar customer? They wouldn’t, so the overproducer couldn’t sell at the CPUC mandated rate.

The CPUC is screwing non-solar customers.

But hey, if I weren’t so lazy, I’d post the math and ITC impact so your eyes could glaze over. And I KNOW and agree solar is a useful power source especially as it does reduce the need for generating plants to meet peak summertime demand.
But it is rigged.

Bryan

This utility company “pushback” isn’t just happening in California, it’s happening all across the nation. If the utilities are successful in adding fees and reduced compensation to net metering in California, it will push the the overpriced solar lease and PPA companies to the edge of bankruptcy. Couple the utility company pushback with the expiration of the 30% federal tax credit next year and it will mean the death of the solar industry in the U.S.

LuapLeiht1

But I thought solar was cost competitive with fossil fuels without subsidies…or so the greens keep telling us.

Bryan

It is if you buy your system from a fair market priced solar dealer like Solar Home in California that’s quoting 10 cents per kWh without any incentives at all.

IanMC

It would be if we took incentives out of fossil fuels which are highly subsidized.

John H. McManus

What’s missing from this report is this: In an area where electrical demand is growing due to population, new industry and office space, big utilities would have to add very expensive new generation capacity and the infrastructure to carry that power to where it’s needed. Rooftop solar can save these utilities hundreds of millions of dollars these new generators would cost. And solar supplies the most power in periods of peak demand — hot summer days — without requiring any expansion of the network.

GreatGreenGeek

For commercial net metering tariffs with a time-of-use base rate – I agree completely. Residential tariffs, except for a few experimental tariffs, are mostly flat cost based on the electricity-use tier. The tariff currently treats evening electricity use the same as daytime electricity use.

Unfortunately, the tariff rule-making process is REALLY arcane and includes a lot of steps to make sure it doesn’t unduly burden lower income brackets. I think a use-based tariff with a fixes backup connection fee would be the best approach here. They do the same thing for large commercial customers with large combined heat power plants. Sure, if you operate off the grid or with near net zero use, you pay nothing, but you still need to pay a fee to help keep the grid serving your account. Kinda like paying your insurance premiums, you need to pay for “grid insurance” where if you inverter goes down or you lose a string of panels because of an errant baseball, you can still rely on PG&E to run your toaster.

LuapLeiht1

Very informed answer

Tim Alton

I agree that local rooftop solar on residences, provide a considerable savings on transmission infrastructure from wires to transformers. Certainly in California the peak in summer is much greater than the peak in winter, and it is the summer peak that strains the grid. Unless the power generators do what they did in the winter of 1999 the good old Enron days, there is no shortage of power or grid capacity in winter when residential solar customers power consumption is at a peak. So I do not see any justification for penalizing residential rooftop solar.

LuapLeiht1

We should outlaw summer. See, problem solved.

LuapLeiht1

So the utilities won’t have to install infrastructure and generation capacity to these areas if a portion of their customers have solar panels on their roofs?

Seems to me that having no electricity when the sun isn’t shining will take care of that population growth you’re projecting.

Ben

The utilities need to be taken public– they can’t be run as for-profit entities with incentives aligned against the consumer. The grid needs radical changes, and that will cost money. There clearly need to be some sort of fees in place so we can build modern storage into the grid– perhaps this is a flat monthly fee, but it does not make sense to punish a rooftop power generator for their energy usage if their net usage is negative.

If the biggest problem with rooftop solar is that it is too successful for PG&E to handle, then PG&E needs to be restructured. I hope the regulators make the right choice here and that California finds a way to double down on rooftop energy collection rather than stalling the efforts.

LazLong

I agree that power generation and distribution should be a function of the government, just as highways are. Access to electricity is too important to be left to the whim of profiteers. You only need look at the utilities’ lack of investment in the grid for that to be evident.

Unfortunately this isn’t a panacea. Look at the state of our roads compared to what they were 30 years ago. Government can fail to invest properly. Our citizenry needs to be more active in demanding a better functioning government that sets its priorities more appropriately. ie less bogus military conflicts.

patroy75

We should make apple a government entity too. We should take over the phine companies and give everyone internet. Auto companies should be government owned too. Lets just go full fking blown communist you idiots.

Joe Rodrigues

I want the government to take charge of replacing my toilet paper rolls on my dispenser and refilling the salt & pepper shakers.
Everything !!! Cradle to Slave.

Don Osborn

Solar is good for the solar customer, good for the non-solar customers (net savings or very small net cost), a MUST for the Globe and more solar jobs in CA than all utilities combined. Typical solar customer do NOT shift any more costs than very energy conserving ones. Utilities love solar — BUT only utility owned or controlled solar … customer owned, not so much.

Patrick James Bayham

the utilities can go fuck themselves…their infrastructure is in tatters,just another bunch of greedy turds…they need to go extinct.

LuapLeiht1

Gonna be kind of hard to charge the devices you wrote this drivel on without power.

Patrick James Bayham

not from them.

anthony Loeb

What about commercial use of solar power? Walmart uses solar during the day to power their stores and charge the batteries. At night they use the batteries to power the stores. How does PG&E accept this? It seems to me that Commercial use of solar will cost PG&E more than home solar panels.

Water_the_tree

Oh, it does but not as much as you might think.
Costs non-solar customers, too.
With the tiers, it is hard to be real accurate but the last residential rate increase in 2014 was a doozy. And the meter charge just doubled.

brian_in_arizona

Years ago, natural gas distribution was “deregulated” in many markets. Any gas producer could pump natural gas into a pipeline system and its customers could pipe out an equal amount. The gas distribution utility handled the bookkeeping and charged a distribution fee for use of the pipeline. Natural gas pipeline companies accepted this system because they were always pipeline operators, not natural gas producers. The pipeline companies always bought the gas they distributed from unrelated companies, so the transition was easy.

The electric industry, on the other hand, was developed as an integrated system that combined power production with power distribution subject to public regulation in return for monopoly rights to distribute electricity.

Electric utilities should embrace the pipeline business model: divest their power generation assets and simply charge all comers for “pumping” electricity into and out of the grid. That would place solar, wind, hydro, geothermal, etc and power generation plants on an equal footing: all would be suppliers to a distribution grid which is independent from all suppliers while still being subject to regulation as a public utility.

Water_the_tree

Tried that in CA. Heard of Enron?
Fixed it, kinda. Look up 3rd party generators in CA like Sonoma Clean Power.

LuapLeiht1

That’s essentially what is done in Texas with ERCOT. Very successful.

liuping

Using the method mentioned of calculating “customer’s highest electricity demand for any given month” and charging a fee based on that, is at odds with EV owners charging at high rates during off peak hours (which is good for the utilities). They will have to charge more slowly, and therefore some charging will have to take place during peak hours, putting more demand on the grid that is necessary.

Water_the_tree

Uh, you do know the highest demand could be a single minute? Register on My Energy. Turn off all your electric stuff. Quickly turn it all back on, stove, AC, every thing.
Tomorrow, go find & look at the demand graph. That’ll be your highest demand.
And the tariff will change. Tariffs with demand charges have lower kilowatt charges. Why? Demand is calculated in T&D which is part of the retail rate. Take out demand and bill it as a line item…..
As for EV, look up rare earth mining and EV batteries.

ccagle8

I live in PA. Does it make sense for me to get solar panels on my house? I found this site that apparently gives PA a “B” for solar viability. http://thinksolar.co/

Author

Lauren Sommer

Lauren is a radio reporter covering environment, water, and energy for KQED Science. As part of her day job, she has scaled Sierra Nevada peaks, run from charging elephant seals, and desperately tried to get her sea legs - all in pursuit of good radio. Her work has appeared on Marketplace, Living on Earth, Science Friday and NPR's Morning Edition and All Things Considered. You can find her on Twitter at @lesommer.

Support of KQED Science is provided by HopeLab, S. D. Bechtel, Jr. Foundation, The Dirk and Charlene Kabcenell Foundation, The Vadasz Family Foundation, John S. and James L. Knight Foundation, Gordon and Betty Moore Foundation, Smart Family Foundation and the members of KQED.